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Charity’s “Hybrid Vehicle”— How Goodwill’s dual model succeeds

Charity’s “Hybrid Vehicle”. How Goodwill’s Dual Model SucceedsDonated goods are not an endpoint but a means for building stronger communities

It’s that time of year. Bells are ringing and red kettles are filling with loose change. But Goodwill International is much more than volunteer Santas and thrift stores. In a remarkable system of “redeployment,” Goodwill turns donated items of clothing and household items into jobs. Hundreds of thousands of jobs. In fact, every 27 seconds of every business day, Goodwill helps someone find employment! Read firsthand how Goodwill has gone way beyond making a profit at thrift stores to making a major economic impact in communities around the world.

Through its 165 local agencies in the United States and Canada, Goodwill works to provide employment training, job placement and other community-based services such as career counseling, financial education, résumé preparation, and mentoring to people with disabilities and disadvantages, and anyone facing challenges to finding employment. In 2013, more than 9.8 million people were served by Goodwill agencies in the United States and Canada, and Goodwill assisted more than 261,000 people in obtaining employment.

Goodwill has developed a hybrid model that meshes the dual power of corporate partnerships with community social action to advance its mission. Sherryl Kuhlman, managing director of the Wharton Social Impact Initiative, interviewed Jim Gibbons, president and CEO of Goodwill Industries International. An edited transcript of her interview follows.

Even with a somewhat improved economy, nonprofits have been slow to recover—if they survived at all. With donations down and needs increasing, many are struggling. But one charity has thrived—Goodwill Industries International, to the tune of more than 4 billion in annual revenue. So, what’s their secret?

Goodwill’s founder, Reverend Edgar J. Helms was passionate about the importance of reclaiming the value of both lives and things.

Kuhlman (Knowledge@Wharton): Goodwill is one of those highly recognized brands doing great work. Why don’t you help us understand the business side of your organization. Gibbons (president and CEO of Goodwill Industries International): [Goodwill is] a trusted brand with more than 3,200 thrift stores. It’s a household name. But our real focus is not the thrift industry; our focus really revolves around job creation, job training, and working with individuals and families, so that they can achieve their own personal economic success .

Kuhlman: That’s an interesting point. Most people see Goodwill’s thrift stores as how the charity makes money. So talk about how the stores also help advance your mission.

Gibbons: Well, it’s really two-fold. First, there is the network of Goodwill stores. Each is a community-based organization providing a wide range of other community services. The retail store model serves two functions. One, that entire business infrastructure of 3,200 stores generates 4 billion annually. It’s fully leveraged to create a work environment where individuals with barriers to employment can get a shot. So it could be transitional employment, first-time jobs or even job training programs. And we’re just as happy when we have a talented team member leave us for a new, bigger, better opportunity, as we are to have them on the team in the first place.

Secondly, if those Goodwill stores are run successfully—and they are for the most part—all of the earnings before incremental mission activity are then funneled back to help sustain program and service needs of the community.

Kuhlman: You mentioned the word “sustain,” which brings up a really hot topic in business today—“sustainability.” Your thrift stores provide a really successful example.

Gibbons: Yes. We have an innovative initiative called the Goodwill Job Creation launched in partnership with three founding investors—the Kresge Foundation, the Casey Foundation, and the Ford Foundation. Here’s the exciting part. It’s a loan fund to Goodwill locations building out their social enterprise. Repayment is our measure of success, and currently that happens 100% of the time. But more importantly, it has a social-impact scorecard so that we can connect the dots between the capital outlay, and the social impact derived from that specific investment.

Kuhlman: So any local Goodwill store wanting to expand can go to this fund?

Gibbons: Correct. However, for expansion, we have not fully demonstrated the sustainability of this process. It is working economically, but is it going to bring enough value from a capitalization perspective to make it sustainable? Bottom line is that we’re optimistic that the model is going to work really well.

Kuhlman: Are you loaning money out yet?

Gibbons: Yes, with about $10 million committed in the initial round. And we’re already seeing an interesting development. Economic stability enables you to focus on meeting community needs. That’s vital to a social enterprise or sustainability model.

Kuhlman: You can’t overstate how important that is, because many nonprofits lack that kind of stability. And stability breeds some vision towards the future, and how to do things more effectively.

Gibbons: And vision is what our founder [the Rev. Edgar J. Helms] had from 1902. He was an environmentalist who was not satisfied with the status quo. He was passionate about the importance of reclaiming the value of both lives and things.

Kuhlman: In the spirit of “not being satisfied with the status quo,” how does an organization like yours both protect the brand and get new ideas going?

Gibbons: We are actually a networked organization of 165 independent, community-based organizations in the United States and Canada, and then 14 other countries. What that actually results in is 165-plus innovation labs—test laboratories, where Goodwill tries new things, and if they work, we will share.

Innovate, replicate—and then customize at the community level to meet specific needs. The other thing is, we have to have a real open mind for self-disruption right now.

Kuhlman: The buzz words business students love.

Gibbons: Yes, well, the competitive landscape, technology and new markets,—we’re staying ahead of the curve. All are things that we are staying right on top of. [For example,] Is eBay a disruptor to the Goodwill model? Probably. But Goodwill embraced that, and we have not only a great partnership with eBay, but we also have a Shop Goodwill auction site that has grown rapidly over these last several years. So embracing those disruptions are key to everything that we try to do.

Kuhlman: When you are thinking about how you are going to self-disrupt and respond to disruption, what role do corporate partnerships play in your choices?

Gibbons: Corporate partnerships are really important—both from a cause marketing perspective and brand building, but also for acquiring resources and energy within communities. As corporations are trying to build more substance, they’re moving beyond the PR component of corporate social responsibility and really trying to have an impact with the investment they make. So, for Goodwill, we have a model that allows our partners to have great employee engagement, have a great cause and, at the end of the day, benefit an entire community by strengthening the workforce of the area those corporate partners operate in.

Kuhlman: Let’s look at human resources in the non-profits. You want them to be great at their current job—but also groom them for the next job. How do you think Goodwill— and the nonprofit sector in general—can get better at doing that?

Gibbons: Excellent question. I think talent acquisition in the not-for-profit space is a top three challenge. At Goodwill Industries International, we create a culture that people want to be a part of. We strive to hire people who bring their talents, skills, and willingness to work hard and make a difference. If a person brings the mindset of “I’m just doing a favor,” they’re probably not a great teammate. And we try to be very excited, and clear about the kind of work that we do, and the kind of culture that we try to create, and hold each other accountable for.

Kuhlman: Do you promote people up through the local affiliate to the international organization?

Gibbons: I haven’t actually benchmarked it, but we probably have one of the more comprehensive leadership development and management training programs. To help local affiliates grow their workforce, Goodwill has a social enterprise certificate program so that all employees have an opportunity to build a stackable credential. We also have Retail 101 “train the trainer” in place. But most exciting of all, we have career development opportunities for senior leadership and executive programs.

Kuhlman: What do you see going on for the nonprofit sector?

Gibbons: We have a society where many people of wealth want to create their own not-for-profit to do good work—but also have control. I also see a need for better collaboration in all sectors, including government. How do we accomplish this? We have got to get better on roles and responsibilities, at measuring, at standing tall on common goals and objectives. And when we get all of that done, we will be able to drive consensus in a way that will make the differences we are all hoping to achieve. But the key will be to find that balance between control and collaboration…that’s the sweet spot for making real impact.

It is a non-profit subsidiary of Goodwill Industries of Greater Detroit and produces revenue to fund vital job training, education and placement programs for those facing employment challenges in Metro Detroit.

Located in a 94,000-square-foot industrial facility on Detroit’s east side, Green Works began operations in 2010. State-of-the-art equipment and processes make the company an invaluable resource for sorting, refurbishing, recycling and reprocessing metals, oils and other industrial materials.

Green Works lowers material costs for clients and reduces waste by breaking down industrial recyclables into their most raw form. These materials are then resold in commodity markets or reused in the manufacturing process.

In 2011 alone, the company processed more than 12 million pounds of steel, aluminum, copper and other materials.

Sherryl Kuhlman, managing director of the Wharton Social Impact Initiative, University of Pennsylvania School of Business